If you have an Amazon FBA store, you will appreciate these tips to prepare your Amazon FBA store for investors.
When it comes to selling your business that you have spent countless hours and dollars investing in, the last thing you want to have happened is to walk away with your hard-earned money left on the table due to a lack of knowledge regarding the sale.
Selling your Amazon FBA store doesn’t have to be complicated or risky. And with proper planning, preparation, and the correct advice—you will find both yourself and your investor walking away from a win-win sale situation.
When preparing your Amazon FBA store for a profitable exit, always put yourself in a potential buyer’s shoes. What would be necessary to receive from the seller to convince you of growth potential and future profit? We at Trust The Brokers have outlined just that so you can begin to prepare a successful exit strategy for your Amazon FBA store.
1) When should you exit an Amazon business?
Many Amazon sellers think their store will double next year simply because their business generated X amount of profit over the past 12 months.
The problem with this mindset is that you can never know what might go wrong with a business, and numerous issues can indeed happen in a very short period of time.
On any given day, a competitor may decide to sell your listings or very similar ones at a lower price and destroy your profit margin, just like that. Amazon is also constantly changing guidelines and can decide to close a listing or account for no specific or justified reason.
The conclusion is that you can never accurately estimate what an amazon business will earn over the years to come; you can only execute your plans in the best way possible and stay vigilant to market and competition changes.
When problems start to occur, e.g., bad inventory management, out-of-stock products, declining sales, listing hijackers, or any situation that might make a potential buyer disinterested or afraid of buying your business.
In preparation for a profitable exit, reduce any aspect of the business that is no longer profitable, like relieving your store of any dead stock while continuing to operate and grow the business- no investor wants to see a halt in business operations. Instead, they are looking for constant traffic and sales up until the day of the sale. No buyer wants to put their initial efforts into replacing their stock or finding a new secure supply chain.
At Trust The Brokers, we always advise our sellers to stay on point before and during the sale process and keep running the business as usual, if not better, to demonstrate growth and potential to investors by appearing as a healthy business.
2) Is the business in an upward trend?
Most sellers tend to sell their Amazon business when things go wrong. This mindset is a huge mistake. Successful Amazon FBA stores are what the majority of investors are seeking to get their hands on. Sure, your business may sell on the downward trend, but you will receive a far lower price than if you were to sell on the upward trend. You’re aiming when selling is always to come out with a profitable exit.
The most important thing for an investor is the trend. Whether the business demonstrates a decline in sales compared to previous months/years – you need to have a good explanation for that. Most investors would see this as high-risk and, quite possibly, a primary disqualifying factor.
3) Does the business have additional assets?
Additional assets can be an asset that generates profit or traffic and is included in the business but does not form the primary operation.
For example, it can be a mailing list or other platforms that the brand is selling on, e.g., Woo-Commerce, Walmart, eBay, Shopify, etc. It can also be a social media platform where the brand has followers and engagement, such as a Facebook page, Instagram, YouTube channel, or any other social media account. Other additional assets can be a trademark, registered brand, patented product or design, and anything that makes your business or products unique and difficult to imitate.
4) How is the appearance and functionality of your business?
Any business is evaluated by the last 12 months of activity and profits, even if it sold much more in previous years. For that reason, before selling the business, it is essential to increase your investments in PPC to show the potential buyer a better net profit in the P&L (Profit and Loss statement) for the last 12 months. Another simple but important tip is to update your listing images and copy to improve appearances.
Providing reliable and neat financial statements is arguably the most critical aspect of any Amazon FBA business sale. Don’t slack in this area, as that is where you may see a ton of potential buyers close the conversation if you cannot produce excellent and convincing books.
Knowing what your business is worth is even more vital than having a buyer satisfied enough to invest in your store. Without accurate books, you could be selling yourself short, which is precisely the opposite of what you are aiming for in this major life decision.
5) Always be honest.
It is imperative never to lie or attempt to conceal anything about the business; almost any buyer has their tools and methods of evaluating a business, and they go deep into any aspect. Being upfront about any issues that you have been unable to overcome before the sale of your Amazon FBA business is always key. Trying to conceal information that makes the business look bad won’t help and is not the way we do business here at Trust The Brokers.
Always stay honest but try to make the best first impression you can by not neglecting any aspect of the business.
The writer is Anatoly (Tolik) Eidelman Serial Entrepreneur, Co-Founder of Trust The Brokers.